In Boyce v. The Co-operators General Insurance Company, 2013 ONCA 298, the Court of Appeal has reversed the decision of Mr. Justice Michael Quigley, a ruling that I discussed in a comment last year. The Court of Appeal held that Justice Quigley had been wrong to conclude that the contract of commercial insurance in this case was not a “business agreement” and therefore, that Co-operators could not contract out of the two-year limitation period that would otherwise apply.
The issue in the case was whether an action brought against an insurer more than one year but less than two years after a loss was prescribed by the one-year limitation period contained in the statutory condition that appears in s. 148 of the Insurance Act. That section appears in Part IV of the Act, which deals with “Fire Insurance”. Since a true policy of “insurance against loss of or damage to property arising from the peril of fire” is rare these days (most property policies are multi-peril), the question that always comes up is whether the one-year limitation period in the statutory conditions for Fire Insurance policies can validly be incorporated into the policy as a contractual term.
In my post about Justice Quigley’s decision, I discussed some of the older caselaw. Essentially, the cases have held that it is possible for the statutory condition to become a contractual term, “provided that the insured is not in any way misled by the description of the conditions as ‘Statutory Conditions’.”
On this point, I said in my earlier post that I thought it was “very unlikely that the old approach [taken by the Court of Appeal in International Movie Conversions Ltd. v. ITT Hartford Canada] would still be followed.”
In fact, the Court cited that very case as authoritative, quoted the same passage that I had referred to and held that the language in the policy was “clear and unambiguous”.
What was novel about this case is that it was the first to consider this venerable issue in the context of the provisions of s. 22(5) of the Limitations Act, 2002, which allows parties to vary or exclude statutory limitation periods by agreement. The section only applies to “business agreements”.
Justice Quigley had found that the Co-operators’ insurance policy was not a “business agreement” but rather, was a “peace of mind” contract. The Court of Appeal said that the latter might be true, but it was irrelevant. The determination is to be made “solely by reference to the definition of ‘consumer’ in the Consumer Protection Act, 2002“. That Act says that a consumer “means an individual acting for personal, family or household purposes and does not include a person who is acting for business purposes.” Since the policy in question in this case was for a business, the Court of Appeal rejected the argument that it was not a “business agreement”.
Finally, the Court also disagreed with Justice Quigley as to what the formal requirements are for contracting out of a statutory limitation period. He had expressed the view that there were several requirements, which he drew from a review of other decisions. To these, he added his own requirement, that “any agreement to forego the statutory protection contained in the Limitations Act, 2002 ought, at a minimum, to be signed by the person(s) foregoing such a right in order to make clear that he/she understands the forfeiture of that statutory right.”
The Court of Appeal enunciated a much more liberal test: “A court faced with a contractual term that purports to shorten a statutory limitation period must consider whether that provision in ‘clear language describes a limitation period, identifies the scope of the application of that limitation period, and excludes the operation of other limitation periods.”
This decision certainly gives new life to the legitimacy of the practice of incorporating statutory conditions into insurance policies as contractual terms .